Question.1)“All
modern economies have certain economic problems to deal with”. Examine
and illustrate
the statement.
Ans :
Why is modern economics so confusing?
I studied economics at James
Madison University, and I remember being so confused in my upper level
economics courses. All those letters and curves on the board were
overwhelming! Price-takers and rent-seekers, monopolies and oligopolies,
linear regressions and nonlinear regressions—my brain was constantly in a state
of “information overload.”
If I didn’t know what all the arrows and symbols in my notes meant, how
can I expect a non-economist to understand them? Or more complex economic
realities like the 2008 financial crisis? Or the effects of the stimulus packages?
Economics has become a field for academia
snobs and policy wonks, not everyday people. Why is it so confusing? Might it
be because we are only looking at a very small part of the picture?
One of my favorite songs by singer-songwriter
Andrew Bird, “Give it Away,” indirectly yet accurately reflects what is wrong
with the field of economics today:
What would you have us pay?/I didn’t know
that your love was a commodity /…What about inflation, oh/Your charts and
graphs don’t mean a thing to me
Even though Bird’s song is aimed at an
individual, I think the lyrics shed light on economic issues at large.
In the first verse, Bird references the
commodification of an uncommodifiable substance: love. It
doesn’t take an economist to recognize how
emotions like pleasure, anxiety, charity, guilt, and love effect economic
decision-making.
These emotions cannot be assigned a number,
yet this is what modern economics seeks to do: quantify the unquantifiable.
Emotions are quantified to fit economic models, or economists eliminate the
human element completely. The second verse reveals the result of this sort of
economic dehumanization: charts and graphs
that don’t mean a thing to anyone.
The number one problem with modern economics
is that it fails to see the whole human picture. It has created an abstract,
perfectly rational species of man: homo economicus.
The rational human being assumed by some
economists…Homo economicus, or economic human, is the figurative human being
characterized by the infinite ability to make rational decisions. Certain
economic models have traditionally relied on the assumption that humans are
rational and will attempt to maximize their utility for both monetary and
non-monetary gains. Modern economics has reduced humans to one-dimensional, perfectly
rational economic agents. However, human beings are not always rational
decision makers.
What is an Economic Problem?
In a broad sense, an economic problem can be defined as an abnormal and irrational or irrelevant behavior by socio-economic units and market components. An economic problem can be triggered by any case or causes or even another economic problem. Though there is no scale that measures the level of abnormal behavior, an economic problem is said to have arisen when the abnormal behavior by economic components tend to affect several institutions.
In this discussion, market components signifies 3 major constituents of the market, namely, demand, supply and price. Though the magnitude of all the three components is small, it plays a highly influential role at a macro level. The term institute defines individuals, organizations, companies, government, governing bodies and any unit which is capable of conducting an economic activity.
Meaning
There are several definitions that elaborate upon an economic problem. However, the simplest definition that is accepted world wide is that a problem is an abnormality in economic institutions or constituents that in the view of society at large has a negative influence on earning and spending. The real gist is thus that a 'problem' is a subjective view of the entire society. Rise in gas price by 1 cent is not an economic problem, but a rise by $10 is stated to be an economic problem.
Scarcity
Classical and neo-classical economists and also their school of though, have presented a very practical explanation of the challenges facing any economy, the human wants are unlimited. However, the volume of available resources that is used to fulfill them is very limited. Even the alternatives that are present limited. This combination of limited resources and unlimited wants results into problems. This approach is often termed as the scarcity approach. Thus, when you try to find the solution to any economic crisis, you will have to focus on unlimited wants and limited resources.
List of Economic Problems
Here is small list which is not totally complete and academic arguments to some elements in the list are welcome.
Anti-competitive behavior, laws and practices
Mass bankruptcy filings and insolvency
Economic bubbles and mass business failure
Child labor and improper child welfare development
Commercial crimes and intentional or planned corporate offenses
Corporate crime and planned economic turmoil
Corporate scandals
Corruption
Uncontrolled debt
Economic disasters
Government or bureaucracy induced economic crisis
Mass economic inequality
Energy crises
Ethically disputed business practices
Financial crises (restricted to the financial sector)
Uneven income distribution
Inflation
Market failure (component failure)
Monetary hegemony
Monopoly
Offshoring and outsourcing
Poverty
Economic recessions
Social inequality
Stock market crashes
Unemployment
Mass public affluenza
Abnormal (too long or too short) age stratification
Agflation
Asset price inflation
Bank run
Benefit shortfall
Biflation
GDP or market component contraction
Credit crunch crisis
Crony capitalism
Currency crisis
Cycle of poverty
Deflation
Deindustrialization
Demographic trap
High dependency ratio
Dominant minority
Dutch disease
Economic collapse
Economic mobility
Economic stagnation
Expenditure cascades
Exploitation
Financial contagion
Flight-to-liquidity
Flight-to-quality
Free rider problem
Glass ceilings
Hahn's Problem
Horizontal inequality
Hyperinflation
Income deficit
Innovation butterfly
Insider trading
Kleptocracy
Liquidity crisis
Malthusian catastrophe and trap
Market abuse
Middle class squeeze
Monetary inflation
National bankruptcy
Crude oil depletion
Overcapitalisation
Overpopulation
Pandemic
Panic selling
Pensions crisis
Plutocracy (the rule of wealthy, or rather a combination of wealth and power, sufficing reach other)
Population decline
Real estate bubble
Rural flight
Societal collapse
Spending wave
Stagflation
State monopoly capitalism
Staycation (a time period where a person or a family takes off a non festive, or a non sick leave from work to relax for a day or two)
Stock market bubble
Sunshine tax (a significantly lower wage rate in one region as a result of excessive tax)
Urban decay
Waithood (refers to the long time period between the date of completion of education and date of employment in the lives of many young people)
In the recent past, a considerable number of problems have plagued the world's markets. Here are some explanations.
Inflation
One of the biggest problems ever seen in the developing nations, inflation, involves the rise in price levels of goods and services. The basic reason that can be pointed out is that the population rise is not proportional and is excessive, in comparison to the available resources. Hence the more number of people demand a limited number of goods which leads to price hike. In contrast to this commonly observed theory, inflation is also seen when currency in circulation is increased. Wars, natural disasters other calamities are also accused of inflation. Hyperinflation is very, very fast and disproportional inflation. South east Asian economies are of date suffering from this phenomenon.
Economic Bubble
An economic bubble is high trade and market values of commodities, goods and products, the intrinsic prices of which are very low. The same opposite situation can also arise. Real estate bubbles in United States were responsible for a great deal of reduction in economic activities.
Recession
The third prominent economic problem is recession, which was severely experienced in 2008. This economic cycle is a product of several causes, where in market values, GDP, rate of employment, economic growth stall or fall. This results into credit crunches, fall in rates of employment and overall economic activities. A very prolonged recession is known as a depression.
It must be noted that since economics is a science and art that deals with man, there are several economic challenges that overlap the scope of other social sciences. The reason being that, the focal point of all these issues and other social sciences is mankind.
In a broad sense, an economic problem can be defined as an abnormal and irrational or irrelevant behavior by socio-economic units and market components. An economic problem can be triggered by any case or causes or even another economic problem. Though there is no scale that measures the level of abnormal behavior, an economic problem is said to have arisen when the abnormal behavior by economic components tend to affect several institutions.
In this discussion, market components signifies 3 major constituents of the market, namely, demand, supply and price. Though the magnitude of all the three components is small, it plays a highly influential role at a macro level. The term institute defines individuals, organizations, companies, government, governing bodies and any unit which is capable of conducting an economic activity.
Meaning
There are several definitions that elaborate upon an economic problem. However, the simplest definition that is accepted world wide is that a problem is an abnormality in economic institutions or constituents that in the view of society at large has a negative influence on earning and spending. The real gist is thus that a 'problem' is a subjective view of the entire society. Rise in gas price by 1 cent is not an economic problem, but a rise by $10 is stated to be an economic problem.
Scarcity
Classical and neo-classical economists and also their school of though, have presented a very practical explanation of the challenges facing any economy, the human wants are unlimited. However, the volume of available resources that is used to fulfill them is very limited. Even the alternatives that are present limited. This combination of limited resources and unlimited wants results into problems. This approach is often termed as the scarcity approach. Thus, when you try to find the solution to any economic crisis, you will have to focus on unlimited wants and limited resources.
List of Economic Problems
Here is small list which is not totally complete and academic arguments to some elements in the list are welcome.
Anti-competitive behavior, laws and practices
Mass bankruptcy filings and insolvency
Economic bubbles and mass business failure
Child labor and improper child welfare development
Commercial crimes and intentional or planned corporate offenses
Corporate crime and planned economic turmoil
Corporate scandals
Corruption
Uncontrolled debt
Economic disasters
Government or bureaucracy induced economic crisis
Mass economic inequality
Energy crises
Ethically disputed business practices
Financial crises (restricted to the financial sector)
Uneven income distribution
Inflation
Market failure (component failure)
Monetary hegemony
Monopoly
Offshoring and outsourcing
Poverty
Economic recessions
Social inequality
Stock market crashes
Unemployment
Mass public affluenza
Abnormal (too long or too short) age stratification
Agflation
Asset price inflation
Bank run
Benefit shortfall
Biflation
GDP or market component contraction
Credit crunch crisis
Crony capitalism
Currency crisis
Cycle of poverty
Deflation
Deindustrialization
Demographic trap
High dependency ratio
Dominant minority
Dutch disease
Economic collapse
Economic mobility
Economic stagnation
Expenditure cascades
Exploitation
Financial contagion
Flight-to-liquidity
Flight-to-quality
Free rider problem
Glass ceilings
Hahn's Problem
Horizontal inequality
Hyperinflation
Income deficit
Innovation butterfly
Insider trading
Kleptocracy
Liquidity crisis
Malthusian catastrophe and trap
Market abuse
Middle class squeeze
Monetary inflation
National bankruptcy
Crude oil depletion
Overcapitalisation
Overpopulation
Pandemic
Panic selling
Pensions crisis
Plutocracy (the rule of wealthy, or rather a combination of wealth and power, sufficing reach other)
Population decline
Real estate bubble
Rural flight
Societal collapse
Spending wave
Stagflation
State monopoly capitalism
Staycation (a time period where a person or a family takes off a non festive, or a non sick leave from work to relax for a day or two)
Stock market bubble
Sunshine tax (a significantly lower wage rate in one region as a result of excessive tax)
Urban decay
Waithood (refers to the long time period between the date of completion of education and date of employment in the lives of many young people)
In the recent past, a considerable number of problems have plagued the world's markets. Here are some explanations.
Inflation
One of the biggest problems ever seen in the developing nations, inflation, involves the rise in price levels of goods and services. The basic reason that can be pointed out is that the population rise is not proportional and is excessive, in comparison to the available resources. Hence the more number of people demand a limited number of goods which leads to price hike. In contrast to this commonly observed theory, inflation is also seen when currency in circulation is increased. Wars, natural disasters other calamities are also accused of inflation. Hyperinflation is very, very fast and disproportional inflation. South east Asian economies are of date suffering from this phenomenon.
Economic Bubble
An economic bubble is high trade and market values of commodities, goods and products, the intrinsic prices of which are very low. The same opposite situation can also arise. Real estate bubbles in United States were responsible for a great deal of reduction in economic activities.
Recession
The third prominent economic problem is recession, which was severely experienced in 2008. This economic cycle is a product of several causes, where in market values, GDP, rate of employment, economic growth stall or fall. This results into credit crunches, fall in rates of employment and overall economic activities. A very prolonged recession is known as a depression.
It must be noted that since economics is a science and art that deals with man, there are several economic challenges that overlap the scope of other social sciences. The reason being that, the focal point of all these issues and other social sciences is mankind.
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